Difference Between FHA and VA Loans

FHA vs VA loans

The Federal Housing Administration (FHA) and the Veteran Administration (VA) loans are two different types of loans available in the US, which provides financial assistance for people to have a home of their own. Though both the FHA and VA loans have the same purpose of providing housing loans, they are different in their various programs.

While the FHA came into existence in 1934, the VA was created yen years later in 1944. The Federal Housing Administration, which is a branch of the government, guarantees the FHA loans. On the other hand, the Veterans Benefits Administration, which is a subdivision of Department of Veterans Affairs, guarantees the VA loans.

While every person is qualified for FHA loans, only veterans who have been discharged from service or still serving are eligible for VA loans.
Another major difference that can be seen between FHA and VA loans is with regard to Value restriction. While the FHA only allows about 96 per cent financing, the VA allows 100 per cent financing.

When considering guarantee policy between the FHA and VA loans, the former comes with mortgage insurance, which is not needed in the other loan.

When the FHA comes with a down payment, the VA does not have any down payment. VA loans offer fixed rates and the loans are available to any veteran irrespective of his credit history. They also come with limitations on their closing costs. On the other hand, the FHA loans come with flexible interest rates. However, there is also an option of fixed interest rates in FHA loans. One can see that the fixed interest rates of VA loans are lower than the FHA interest rates.

Summary:
1. The Federal Housing Administration, which is a branch of the government, guarantees the FHA loans. On the other hand, the Veterans Benefits Administration, which is a subdivision of Department of Veterans Affairs, guarantees the VA loans.
2. While the FHA only allows about 96 per cent financing, the VA allows 100 per cent financing.
3. When every one is qualified for FHA loans, only veterans who have been discharged from service or still serving are eligible for VA loans. The FHA loans come with mortgage insurance, which is not needed in VA loans. While FHA loans comes with down payments, the VA does not have any down payments.
4. VA loans come with fixed rates but the FHA comes with flexible rates.

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